Drugs' high cost is a form of subsidy for jobs

Tue, Dec 11, 2012, 00:00

ANALYSIS:Price of Irish drugs up to 45 per cent dearer than in Sweden

The problem of high drug prices in the Republic seems to be as intractable as it is complex.

The cost of commonly used medicines has remained in the stratosphere even as successive ministers for health promised to deliver a better deal for people and the health service.

Dr James Reilly now promises to do what his predecessors failed to achieve, by getting patients and doctors to switch to cheaper generic medicines, and by cutting the price of all drugs, those on patent and off.

There are reasons to believe that the Minister might get further along this road because he is tackling the problem on a wider front than before. Not only have fresh deals been agreed with the makers of branded drugs and with the generics manufacturers, but new legislation before the Dáil could revolutionise the way drugs are prescribed for patients.

Under the legislation, pharmacists will have the power to substitute cheaper alternatives to the medicines prescribed by a patient’s GP. Pricing will also be revised with reference to the cheapest option in a basket of medicines where their effect is the same.

There are, however, reasons for being sceptical.

It is hard to avoid the conclusion that high prices people pay here is a form of subsidy for the 25,000 jobs provided by the sector in this State. The pharmaceutical industry accounts for between one-third and one-half of our exports and it would be a foolish government that would upset that investment.

The Republic is of course small fry among pharmaceutical markets. But drugs here can influence price levels set in other countries, within and outside the EU. There is, therefore, a lot more than the local market at stake when the department negotiates with the drug manufacturers.

By now, just about anyone in need of expensive long-term medication will have his or her own tale of how these drugs can be obtained abroad for a fraction of their cost here. Surveys confirm that the cost of medicines to the Irish public is among the highest in the world.

The industry argues that it is misleading to compare the Republic with generally cheaper countries by the Mediterranean, or with bigger economies where economies of scale apply. However, how then to explain how one recent survey found that Irish drug prices were up to 45 per cent dearer than in Sweden, or that the cost of some drugs were up to 24 times the cost in New Zealand – a similarly-sized economy?

Of course, the highest price of all is paid by the HSE, which spends almost €2 billion on its drugs bill. Another layer of the problem results from the low level of prescribing of generics – about 5 per cent, compared to 80 per cent in the United Kingdom.

There are further layers to this problem, which go towards explaining why we all pay so much – the mark-up charged by pharmacists, for example and the unseen power of wholesalers.